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A Microsoft Business That's Still Kicking Ass

steve-ballmer-pump-200x150.jpgAfter we published "Microsoft Windows: Beginning of The End," a reader suggested that we also point out that Microsoft's Office franchise is still going great guns.

And it is!

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Microsoft's Business Division, which is 90% Office, grew a startling 20% year over year last quarter from a $4 billion base. Why? Ongoing adoption of Office 2007 and helpful FOREX movements. The strength came from both businesses and, importantly, consumers:

MBD revenue increased reflecting growth in licensing of the 2007 Microsoft Office system and included a favorable impact from foreign currency exchange rates of $214 million or five percentage points. Business revenue increased $544 million or 16%, primarily as a result of growth in volume licensing agreement revenue and strong transactional license sales to businesses. The increase in business revenue also included a 10% increase in Microsoft Dynamics customer billings. Consumer revenue increased $288 million or 36%, reflecting increased sales primarily due to promotional pricing programs for the 2007 Microsoft Office system.

We have often noted that, here at SAI, we primarily use Google Apps as our office productivity program. This isn't because we hate Microsoft: It's because Google Apps is more convenient. We do HAVE Office, however, and we still use it occasionally (such as when we read the Microsoft Corporation 10Q, which is the only 10Q we know of that comes formatted as a Word document).

We have noted that the rapid adoption of Google Apps represents a threat to the Office business. Based on last quarter's results, it is obviously a distant threat.

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We should also note that Microsoft finally appears to have launched its own Google Apps killer--web-based Office Apps. According to ReadWriteWeb, these allow you to do the same thing you can do with Google Apps, which is edit documents from a browser. We haven't played with it yet, so we can't confirm, but we hope that's what it actually allows (Anyone?)

So this leaves one remaining question: Do we need to own an Office license to use Office web apps, or is Microsoft going to give them away for free, like Google? It makes a big difference. Not to Microsoft's current business, which is robustly healthy. But to the ongoing growth of Google Apps--and, therefore, to the threat of cannibalization of Office revenue.

See Also: Microsoft Windows: Beginning of the End

On February 28, Axel Springer, Business Insider's parent company, joined 31 other media groups and filed a $2.3 billion suit against Google in Dutch court, alleging losses suffered due to the company's advertising practices.

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